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"For certain elements of Housing New Zealand's procurement approach there was no documentary evidence that value for money, including overall costs, had been properly considered."

HNZ did not cap payments for any of Mr Body's contracts and only set specific deadlines in half of the contracts - increasing the risk of higher costs. In one year alone, Mr Body's company was paid $1.4 million.

The Auditor-General also said HNZ had "significant weaknesses" in its records on two potential conflicts of interest.

While advising on the sale of state houses, one of Mr Body's clients, UK-based investment fund John Laing, was expressing an interest in buying some of the state houses.

The Auditor-General said Mr Body had ended his connection with the company in 2012. It had advised HNZ to improve its conflict of interest rules.

As a result of the inquiry, it was also extending its auditing of the housing corporation.

Mr Twyford said the report was a "rap over the knuckles" for the Government.

He said the public was opposed to the sale of thousands of state houses - potentially to foreign companies and merchant bankers.

"It's even more galling when this increasingly arrogant Government can't even follow basic rules in the sell off," he said.